The furore is over the absence of legal support to minimum support price (MSP), but it’s the skewed nature of these producer support prices that impedes crop diversification and leaves the average Indian farmer in the lurch.

Nothing proves this more than the current post-harvest sentiment among farmers in the ‘Green Revolution’ states of Punjab and Haryana. MSP purchases of the new wheat crop have just had a brisk start, and is promising to be in full swing over the next few weeks. However, mustard and maize crops which, agriculture economists say, are best suited for the region, are going abegging. Market prices of the two crops are significantly below the MSP, but there’s hardly any purchase of the two crops by government agencies at the support price.

“Mustard is being sold by farmers at an average price of Rs 5,000-5,400 per quintal against MSP of Rs 5,650 a quintal,” an official from the management board of Punjab’s Rajpura mandi, one of the biggest grain markets, told FE. He added that the situation wasn’t any different for maize farmers during the last kharif season—market prices for the cereal that needs much less water than paddy and wheat, and is environmentally conducive for the region, were 10% below the MSP.

While MSPs are announced for as many as 23 crops, support-price procurement is limited to just four crops—paddy, wheat, sugarcane and cotton. So, value of MSP purchases is just about 6% of the gross value added in agriculture and allied sectors. That such MSP operations are not of much help, not just to the agriculture economy, but even farmers’ income, is evident from the losing share of MSP cereals in farm-sector GVA, while horticulture, poultry, fisheries and dairy sectors are growing at much faster rates.

Indian wheat isn’t globally competitive, but the current MSP policy in Punjab forces farmers to stick to the crops that fast deplete water tables. Several farmers who FE spoke with at Rajpura and Karnal (Haryana) said they have no plan to increase the area for mustard or maize in the coming seasons, as wheat and paddy are lucrative.

Aay Vir Jakhar, chairman, Bharat Krishak Samaj, said: “Given the way MSP is structured, it leads to biodiversity loss and monoculture. Additionally, it has become a disincentive for crop diversification.” The farmers say lack of government procurement for crops such as maize, mustard and pulses discourage them from curbing cultivation of paddy and wheat, where there is assured purchase on MSP. 

“Without price assurance, we would not be shifting out of growing paddy and wheat,” Mandeep Singh, a farmer from Fatehgarh Sahib district, Punjab, said.

“Unless farmers are not assured of MSP purchase, crop diversification would not happen,” Manjinder Singh, secretary, mandi committee at Khanna, which is Asia’s biggest grain market in terms of daily arrivals, said. He said the government should set a benchmark purchase price for potatoes as well so that farmers are encouraged to grow it.

Pitching for crop diversification, the economic survey (2023-24) of the Punjab government had recently stated that the cropping pattern of growing water-intensive rice and wheat along with free electricity supplied to farmers has resulted in depletion of ground water levels, and the model is ‘economically and ecologically unviable’.

Stating that yield of cereals, pulses and oilseeds in Punjab has been higher compared to national average, the survey has noted “yields are stagnating in wheat and rice and it is another reason for crop diversification to be the way forward”.

But MSP purchases for more crops is not seen as a solution by experts. Ashok Gulati, agricultural economist and former chairman, commission for agricultural costs and prices (CACP), said, “In Punjab, it’s important to ensure that farmers move away from paddy and wheat. In order to do that, a lumpsum amount of Rs 25,000 to Rs 30,000 per hectare may be given to farmers who grow less water guzzling crops like pulses, oilseeds, millets and maize.”

Making MSP legal and forcing the private sector to buy at MSP is not practical or desirable, Gulati said: “One can make MSPs for these crops effective by asking government agencies such as Nafed to procure whenever market prices go below MSP.”